Ghana’s annual inflation rate hit a four-year high of 15.3 percent in July and analysts warned that food prices could push it up further after the harvest if the government fails to slow its borrowing.
The rise in inflation from 15.0 percent in June was driven by increases in the price of utilities and fuel, mainly due to a persistent decline in the value of the cedi currency, government statistician Philomena Nyarko told a news conference in Accra.
The rise pushes the rate past Ghana’s revised 2014 target of 13.0 percent, plus or minus 2 percent, set in last month’s mid-year supplementary budget.
The economy’s fast growth, driven by exports of gold, cocoa and oil, has been undermined by problems including a rising budget deficit and the cedi’s rapid decline – 27.5 percent since January, according to Bank of Ghana data.
Nyarko said she expected food inflation to ease during the August to October harvest season “and this could influence the index in coming months.” The monthly inflation rate in July was 1.6 percent, she said.
Razia Khan, head of Africa macro research at Standard Chartered Bank, said the harvest’s effect on price pressures may be minimal and inflation could re-emerge in the fourth quarter if the government fails to rein in the deficit.
“The key for Ghana is how quickly it can resolve its rapid debt build-up, and how,” she said in an emailed response to Reuters.
While the cedi’s weakness could drive inflation in the near term, “resolution of Ghana’s debt build-up will be the single most significant factor for the inflation range in the medium term.”
Ghana’s public debt stock stood at 58.4 billion cedis or 55.4 percent of GDP at the end of March, according to the central bank. The country is set to issue a third Eurobond of up $1.5 billion this month for government finances.
This month, the government said it would seek support from the International Monetary Fund to address the challenges.